The world economy is not headed for a double-dip recession, according to Singapore Prime Minister Lee Hsien Loong, but he does not expect a dramatic recovery.
In an interview with CNBC, Mr. Lee said that while the economic conditions globally have stabilized, more needs to be done to stimulate growth.
"US consumers have to save more and spend less," Mr. Lee said, "And the U.S. government also has to save more and spend less which I think is going to very difficult to do. And that is a macro adjustment which is necessary."
"At the same time, on the Asian side, economies like China have to stimulate their domestic demand," Mr. Lee added.
Prime Minister Lee said the 3.5% third-quarter GDP growth rate logged by the U.S. economy is a decent figure, but the key challenge will be whether the world's biggest economy can sustain the growth.
"The question is whether it can be sustain beyond the government stimulus, because (when) you've pumped so much money in, it is bound to show up somewhere in the GDP numbers," Mr. Lee said. "But beyond that, can you have self sustaining prosperity?"
Mr. Lee said that Singapore's exports - a key driver of the country's economy - have bounced back, even the comeback is not spectacular.
"It (export sector) depends a lot on the U.S., although we trade a lot with China, the ultimate market is really the United States," Mr. Lee said.
Singapore, which will host next week's APEC summit, is trying to push forward the free trade agenda, believing open markets are a win-win situation for all.
Prime Minister Lee said the talks will focus on measures to stimulate further recovery in the global economy as well as Asia-Pacific's role in boosting trade.
"Asia Pacific is a major part of the world economy. It has half the GDP of the world and 10 of the G20 members are APEC members. And if we can work together to sustain growth in the region, which is the theme of the APEC conference this year, then I think it makes a big difference to the world economy," Mr. Lee said.
- Watch the full interview with Singapore Prime Minister Lee Hsien Loong in "CNBC Conversation" airing this weekend on CNBC.